Putting It All Together
A typical mortgage lender has many different departments: retail or origination, underwriting, and closing are the ones you must be familiar with.
The department that most typically deals directly with you is the retail or origination department. The key individuals who work in this department are the loan officers and processors. It is a loan officer’s responsibility to sell his company’s loan products to consumers such as you. It is the processor’s responsibility to gather the necessary documentation which is required to submit to the underwriter along with your loan application. As you have learned in previous articles there is a tremendous amount of paperwork that must be completed or furnished to have a loan underwritten. The processor is generally the person who has taken your loan application, processed your VOD, VOE and VOR, and collected your personal paperwork such as pay stubs, bank statements, and tax returns. It is their job to put all of this paperwork together in a certain order to be sent to the underwriting department for review. The processor also makes the calculation of how much monthly payment is proposed for you and usually writes a cover letter outlining the strengths of the file such as your excellent job history or significant assets. The file and supporting documents are then sent to the underwriting department for review and hopefully approval.
It is the underwriter’s job to apply the rules of whichever loan program you are applying for. If you are applying for a conventional loan then the underwriter will apply Fannie Mae, Freddie Mac or your local bank’s rules. If you are applying for a government loan such as FHA, VA or RDA then the underwriter will apply those rules. The underwriter will determine whether you meet the requirements of these programs as to your employment history, rental history and credit history. The underwriter will also calculate your income and apply both the front end ratio and back end ratio to determine if the processor has done it correctly. If the underwriter is satisfied that the file meets the requirements of the specific loan program then your loan application is approved. If not then it is denied.
A loan that is approved by the underwriter is then sent to the closing and funding department. Coordinating the events with your processor, individuals in the closing department prepare the documents that you will sign the day you purchase your home or close your loan. They forward these documents to the title company or closing attorney’s office to be available on the scheduled closing day. After closing, when the funding department has received notification from the title company or attorney that all documents have been signed and recorded they release the funds of your loan. The title company or attorney then uses those funds and writes the checks to pay the home seller, real estate agents, mortgage broker and any other individual who is owed money as a result of your home purchase.